Firms that stood out through the pandemic are actually struggling to maintain enterprise
- September 2, 2022
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Several companies that convinced investors they were well positioned to continue growing after the height of the health crisis turned out to be wrong.
Few companies have grown more amid the economic turmoil of the pandemic than Peloton in the United States.
With people unable (or unwilling) to go to the gym, consumers rushed to buy their fitness equipment and, more importantly, sign up for their online classes. Peloton posted its first quarterly earnings for the full year 2020, with revenue jumping 139% and shares up 434%.
The impulse was short-lived. As gyms reopened and class subscriptions and equipment sales plummeted, so did the company’s outlook.
On Thursday, after posting a worse-than-expected fourth-quarter fiscal loss, Peloton CEO Barry McCarthy wrote in a letter to investors that “opponents will look to our financial performance in the fourth quarter. quarter and see a melting pot of declining revenue, negative gross margin and operating losses. They will say it threatens the viability of the business.”
McCarthy, however, sees big things ahead for the company despite its troubles, claiming Peloton has made significant progress in its turnaround efforts and halting its cash burn rate.
Investors don’t share your faith. The shares have lost more than 90% of their value since late 2020 and are now worth less than half of what they were at the start of that year.
Peloton is hardly the only pandemic winner to recently turn into a post-pandemic loser. Several companies that convinced themselves – and investors – that they were well positioned to continue growing after the health crisis subsided turned out to be wrong.
Here are some other 2020 hits that became 2022 duds:
The pandemic has forced people to stay at home and, in millions of cases, to start working from there. Many took the money they were saving by not traveling or taking vacations to buy furniture and other items to spruce up their homes.
This household goods shopping spree has come to a halt. Consumers have shifted their purchasing priorities, especially amid skyrocketing prices for essentials like food and gasoline, which have forced many households to cut back on non-essential purchases. Now, those purchases are more likely to be for things like delayed travel plans and not for more stuff.
The shift in spending has hit a wide range of retailers, including giants like Walmart and Target. But perhaps the poster child for companies reeling from this shift is online homeware retailer Wayfair, which has just announced that it is cutting 5% of its staff. In making the announcement, the CEO admitted that the company was overly optimistic about its potential for continued growth.
“We grew Wayfair significantly to keep pace with the growth of e-commerce in the domestic category. We were seeing the tailwinds of the pandemic accelerate the adoption of e-commerce shopping, and personally, I went to great lengths to hire a strong team to support that growth,” CEO Niraj Shah said in a letter to employees announcing the layoffs. “This year, this growth did not materialize as we had predicted. Our team is too big for the environment we are in right now and unfortunately we have to adjust.”
It’s not just that the company isn’t growing as fast as it once was. Like Peloton, Wayfair switched to reverse gear and red paint. Revenue for the first six months of this year was down 14% and just posted a net loss of $697 million compared to a profit of $149 million in the same period in 2021.
Wayfair shares, which were up 482% between the end of March 2020 and the end of March 2021, essentially gave up all those gains.
The Canadian software company that helps retailers sell online was also a big highlight when companies were forced to embrace e-commerce because of the pandemic. Last month, its founder and CEO announced that Shopify was cutting 10% of its staff because its continued growth “hasn’t paid off.”
“Shopify has always been a company that makes the big strategic bets our merchants demand of us – that’s how we succeed,” CEO Tobi Lutke wrote in a memo to employees announcing the layoffs.
The company’s pre-Covid e-commerce growth was steady and predictable, he said, but the early days of the pandemic brought an unprecedented surge in sales.
“Was this increase a temporary effect or a new normal? And so, given what we saw, we made another bet: we bet that the channel mix — the share of dollars that travel through e-commerce rather than physical retail — would permanently jump ahead for five or even 10 years,” he said. “We couldn’t be sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match.”
The good times have not evaporated as quickly as for some of the other winners of the pandemic. But they certainly backtracked.
While revenue increased by 18% in the first six months of the year compared to the year before, Shopify’s costs, including for research and development, nearly doubled.
The company also suffered a $1 billion loss on its capital expenditures in the second quarter, causing it to fluctuate to a net loss of $2.7 billion for the period from a profit of $2.1 billion in the second quarter. last year.
The company’s shares continued to rise through 2021, but have dropped 75% so far this year.
The online meeting platform is not facing the same challenges as some of the other winners of the pandemic. Millions of people are still working remotely, at least some of the time, and Zoom is still profitable.
But profits fell 71% in the first half of this year because of rising costs. The company has been beating earnings forecasts and its share price is still just above pre-pandemic levels.
Zoom reported weaker-than-expected revenue this week and gave an outlook that disappointed investors, causing the stock to tumble 17% on the day the company released results.
For the year, Zoom shares are down 56% and down 86% since their peak in late October 2020, when the pandemic was raging and vaccines were not widely available.
Part of the blame for the drop can be attributed to investors, who got ahead of the curve and pushed the stock price up 765% between the end of 2019 and its peak 10 months later.
Also, all the good news about beating Covid was considered bad news for Zoom: stocks are down 25% in the two days after news of Pfizer’s success in clinical trials of a Covid vaccine in November 2020.
Netflix was very successful long before anyone heard about Covid-19. Even in the face of increased streaming competition, the platform enjoyed success in 2019 as two original films, Martin Scorsese’s “The Irishman” and Noah Baumbach’s “Marriage Story,” drew viewers and best nominations. movie. “The Crown” has returned for a third season with a new cast.
With this formation, Netflix stock gained 21% over the course of 2019, with its revenue up 28%. The service added 27 million subscribers globally during the year.
But things really started to work out with the pandemic lockdowns. Netflix added 16 million subscribers in the first three months of 2020 and ended the year surpassing 200 million subscribers for the first time.
Netflix stock also soared, more than doubling in value since the start of 2020 to a record $691.69 in November 2021.
But competition has increased. In the first quarter of this year, the company lost 200,000 subscribers globally, the first drop in subscribers in a decade, and nowhere near the 2.5 million gain it had previously predicted. In the second quarter, it lost another 970,000.
The company has also been losing investor support. Netflix shares have lost nearly two-thirds of their year-to-date value, although they rebounded from a 12-month low in May as investors were bracing for even greater subscriber losses.
Source: CNN Brasil